Monday, February 1, 2010

As I'm sure you've heard by now, here was a major kerfuffle between Amazon and Macmillan over the weekend that is so hugely important it will necessitate the postponement of my planned "Last Week in Publishing" post. I KNOW. Didn't Macmillan and Amazon realize the implications to my blog???

Stay with me, because I'm going to go into the weeds a bit to break this down. And to do that I need to provide some background info.

The Background Info

The whole issue revolves around e-book pricing: many publishers have long been extremely uncomfortable with the $9.99 price point that Amazon established for e-books, feeling it's too low and acclimating consumers to a price that is, from a publishers' perspective, unsustainable. In the words of Hachette CEO David Young when Hachette announced that they would delay some e-book releases: "I can't sit back and watch years of building authors sold off at bargain-basement prices."

Here's the interesting thing about that, and something to keep in mind because it's not often mentioned in the discussions surrounding Amazon: major publishers weren't getting paid based on the $9.99 price point. According to the NYTimes, for a new release publishers have been receiving roughly the equivalent of half the hardcover retail price. For a $24.99 hardcover book available as an e-book for sale at $9.99, again, according to the NY Times, Amazon pays the publisher somewhere around $12.50 and uses it as a loss leader, presumably to sell Kindles.

Along comes the iPad and Apple's "agency" model. Apple is allowing publishers to set the list price of their own titles, and they pay publishers a 70/30 split. E-books will cost no more than $14.99. This means that for a $14.99 iBook, publishers will receive $10.43. (note: Random House hasn't come to an agreement with Apple and is still in discussions)

Do you see what's interesting about this?? Take this hypothetical $25.00 new release hardcover. Publishers are willingly taking less money from Apple ($10.43 in our hypothetical example vs. $12.50 for Kindle) in exchange for setting what publishers feel is a more sustainable list price.

Assuming all these reports are right. Also my math.

The Kerfuffle

This past week, as Macmillan CEO John Sargent explained, Macmillan told Amazon they wanted to use the Apple agency model for Kindle e-books. Essentially, Macmillan was proposing that Amazon could pay them less money per title if Amazon would let them set their own e-book prices.

The dust settled somewhat Sunday afternoon as Amazon said that they would "ultimately capitulate" to Macmillan's demands and abide by the agency model with Macmillan, though the buy buttons have not yet, as of this writing, been reactivated. And that brings us up to speed.

Say What Now?

So. Why would a publisher willingly take less money per e-book copy sold in exchange for, essentially, the ability to charge consumers more money for an e-book? And why would Amazon react so vehemently when Macmillan was proposing that they receive more per copy?

Well, you'd have to ask them yourself to get the real answer. I have a few guesses though (and everything below should be taken as such).

Amazon's position is relatively easy to guess at: they want e-book prices to be as low as possible to entice more people to buy Kindles and to make sure they have the lowest prices period. The more people who buy Kindles, the more people who are locked into their proprietary format, who are probably likely to stay with Amazon to buy e-books in the future, and, by the way, who may be less likely to buy paper books from a bookstore, further consolidating Amazon's position as the dominant player in the bookselling world. They want the ability to sell products to consumers at as low a cost as possible.

Presumably, publishers are (presumably) concerned about losing control over the price of their books in the marketplace, especially when they compete with higher priced editions of the same work.

And, of course, lurking behind all of this is the iPad.

The iPad Factor

I plan on delving into the book world implications of the iPad in a later post, but one of the great ironies of the iPad, as Bloomsbury publisher Peter Ginna recently noted, is that Amazon and Apple are very likely going to be competing against each other on the very same device. Apple will be selling e-books through the iBooks store, and Amazon will (I'm guessing) make books available via its Kindle app.

This set up an interesting scenario where these models could potentially compete against each other head to head: Amazon presumably selling an iPad compatible e-book for $9.99 and Apple selling an iBook for $14.95. This led Ginna to ponder whether the iPad was actually a trojan horse for Amazon, who could use their app presence on the iPad to further corner the e-book market. Or, even if Amazon decides against making an iPad app available, they could still offer the same e-books at a lower price on the Kindle in order to retain a key Kindle selling point.

And that, I would postulate, is the one of the keys to all of this. Macmillan's books will now be the same price on the Kindle as they are in the iBooks store on the iPad (and on the Kindle App on the iPad if Amazon goes that route). Amazon made an audacious bid to retain the ability to be the lowest priced e-book vendor for Macmillan's books. Amazon blinked.

Oh Yeah, What About the Consumer?

This ain't over. Not by a long shot.

As we've seen repeatedly in digital media (hello, music industry!), consumers are the ones who are going to have the most power to determine what the coming e-book landscape is going to look like. And this is where consumer experience and expectations, DRM, proprietary e-book formats, piracy, and competition are going to come together to dictate prices. I'm not exactly going out on a limb to say that consumers have their own expectations for what an e-book "should" cost, and these might not mesh with what a publisher thinks they "should" cost.

And as a recent NY Times article points out, customers are not exactly lacking for free or cheap e-book options. On the iPad and similar devices of the future, they're not going to be lacking for cheap or free non-book distractions either.

You didn't hear it from me, but they might even still want their books on paper too. Which they bought at their friendly neighborhood bookstore.

When the dust clears on all of this, will publishers regret accepting a lower price per copy in exchange for the ability to set higher prices? Or was Macmillan smart to take a stand against very low discounting to help level the playing field? Have we seen Amazon's peak as an e-book player or will they continue to dominate the coming e-book world? Will publishers follow Macmillan's lead or work out their own arrangements? Are you on Team Amazon or Team Macmillan? Or maybe even Team Can't We All Just Get Along?

You tell me. I'm extremely curious to know what you think about all of this.

No matter what Mr. Moneybags says when you pass GO -- Monopoly is BAD.

This is more than a matter of competitive pricing. This is more like "drive the other guy into the ground so I have no competition pricing. Without competition, that lovely low price tag will ratchet itself up and up and up.

Amazon acted like a spoiled child. For them to systematically remove the buy button for all of MacMillan and their imprints was extremely childish.

I'm not an e-book reader, don't own a device and this really doesn't make me inclined to want to buy one especially from Amazon if they can unequivocally go into my device and remove what I've purchased.

Something like this needed to happen. But I see Amazon being accused of anti-trust laws in the near future.

I don't think Amazon blinked, I think they feinted. Rather than being the gorilla who beat the publishers into submission, they said it should be A, Macmillan said it should be B, Amazon argued, Macmillan insisted, and now the public will say, No, we want A. Amazon will then get to turn to all the other publishers and say, see? We know what we're doing. Follow along kiddies.

Good business strategy (if it works, which I think it will), but disappointing in that it's Amazon and I dislike the Kindle.

Next step in the ebook war is machine-neutral sales with a national/global? storefront/visiblity. I think Borders got there too soon.

(As an aside, I've purchased three B&N ebooks and read them on my Blackberry with free downloaded software. While I don't want to buy paper books any more [my shelves can't handle them], I lament the fact that I won't be able to read the books years from now when the B&N is no longer supporting its software and single-use machines have faded into niche sales.)

The word author seems to be missing in these discussions. Do you anticipate that one day more authors will not give permission for their works to be sold as ebooks until many months after publication? Is it something that will need to be written into the author/publisher contracts?A higher price point for ebooks may give book stores more of a fighting chance to stay afloat. It would be sad to lose even more book stores.

Seriously, though, from a consumer standpoint, I prefer hard copy books that I can display on my shelves and go 'oh, yeah. I'm a bookworm' as opposed to carrying about a book that can break if I -inevitably- drop it. There's plenty of techo-savvy people out there, but there's plenty of us who aren't, which is why we have to call for assistance when our gadgets break.

Now that Macmillan got what they wanted - from Amazon - and I am shocked that they worked this out at a lightening speed a Jedi Knight could admire... I think they were right.

I've worked in digital entertainment for over a dozen years and the 'content pull' only hurts the consumer. I'm glad Nathan mentioned the music industry because it is important to look at other content driven media - even if they are not exactly the same- and learn from their mistakes.

In this case Amazon does care a lot more about the consumer. I've worked at some huge companies who didn't care if they pulled a major partner's content away for years. The users didn't know, they don't pay attention to specific companies they just want the content they want and when it's not there you drive them away to competitors or heaven forbid- the library!

Apple did the same thing in music pricing songs for .99 cents once again creating a singles market to sell iPods. Amazon prices some singles at .89 cents because by that time the record labels were so annoyed with Apple. Amazon consumers buy full albums & it's a different consumer, one that isn't left out of the iTunes 'indie rock cool kid' world and feels looked after by Amazon.

It did bother me to see Amazon pulling the same 'loss leader' business to sell devices. Publishers and writers don't get a cut of those devices. $2.50 is not a lot when it helps you sell a $259 item. Now that the Macmillan content is back, I have to applaud Amazon and I can't wait to see what products are out there in five years. In the long run when you have a competitive market it means a lot more consumers are paying attention. A device that only sells books may not appeal to younger consumers who are used to consuming 3 or more types of media at once (TV, Radio, Computer, Smartphone, etc.) I know there are 3 million Kindles out there but this makes consumers want to read more. I can't argue with that!

I would not buy a first generation anything from Apple though. It's also irritating that they made this announcement right a month after the holidays. Suddenly that shiny new Nook or Kindle may not be as attractive to owners (although mine still makes me giddy!)

Macmillian is following Baen Books (www.baen.com)example of e-book distribution. Flexible and scalable pricing that is driven by "time on the e-shelf" discounting. (Early releases cost more than later releases -- which matches the hardback-to-paperback pricing scale.) The official letter is here http://www.tor.com/index.php?option=com_content&view=blog&id=58701

The fact that the iPad release and iBookstore allows publishers to renegotiate in favor of getting affordable e-books in the hands of the readers is a good thing.

Plus, I don't like that Amazon treats every e-book customer as though they are a thief.

As an author I'm watching this with much interest. As a consumer? I'm waiting for the dust to settle. Formats are going to change like the wind along with the devices. I'm cheap, and don't want to lay out cash for books I'm going to lose at the whim of developers.

I buy a lot of eBooks, mainly for my Kindle but I'm also experimenting with nook and Sony Reader Daily Edition. $9.99 seems like the right price for a bestseller or new release. If eBooks start costing more than that, I'll be fewer. And if just a few publishers charge more, I will avoid their books. These are all profit-making corporations, but I think Bezos does look at a larger mission here, one that I will benefit from if he achieves it - every book every published, available in 60 seconds etc. Sounds good to me...

I'm with Team My Head Hurts. Oy.I think a publisher should have the right to set their own prices, no matter what the format. The customer can always choose not to buy them.Amazon, on the other hand, behaved badly IN PUBLIC WITH EVERYONE WATCHING. I am not an ebook user, but I can tell you, I am a lot less likely to buy my books through them from now on. And I buy a lot of books.Thanks for putting this all so concisely, Nathan.

To be perfectly honest, speaking as a consumer who Really, Really Wants a Shiny Sparkly E-Book Reader, this whole thing turns me off. I'm anti-DRM because of the profession I work in (providing library services to the print-impaired), but if that's the way things go, I'll suck it up and deal with it. But DRM notwithstanding, until they get their collective act together, I'm not going to shell out the cash for a device. Even though in a perfect world, I'd already own one.

Not counting the bandwagon jumpers who'll go for one or the other because they can't or won't wait, I think they're all shooting themselves in the feet here.

Quite frankly, I'm for anything that challenges Amazon as the dominant force in publishing. Because what the big six realize, that not a lot of consumers or others do, is that if Amazon starts dictating the prices and closes down any real competition, they will not only be the ones ratcheting up the prices of books, but they'll also have control over what people can and can't have access to. This isn't the first time Amazon has said, "Nope, you don't get to buy that, now." Between pulling devices from the Kindle (haven't learned anything from the first time they pulled a book), the fact that this is what shows up for a homosexuality search even now, after their supposed "glitch" that stripped the rankings of books with homosexuality in them, and their continued capitulations to Scientologists to withhold or ban any comments or books critical of Scientology, I can't say I trust them. The publishing industry certainly shouldn't.

Background - I, too, never thought I would own an ebook device. My husband gave me a Kindle for Christmas - and I caved, hard. I love it! I recently took it on a short trip to Seattle. It was, to use a term that dates myself, very cool. I downloaded my favorite collection of Poirot shorts for right under 5.00 and happily read through the stories while my husband battled the traffic.Now, I own all those Poirot stories in paperback or hardcover....still, for 4.99 I didn't mind having it on my Kindle. And that is rather my price threshhold for purchasing ebooks. If there's a book I really want - really, really want, like the latest Stephen King or Elizabeth Kostova (hoping to get that one for my birthday)...I'm going to get it in hardcover and enjoy every wonderful moment of feeling the weight of that book in my hands as the story carries me away.

So, having a Kindle does not in any way mean I'm not buying more printed books. Nor am I going to pay 15.00 or 10.00 for ebooks. I download freebies or samples so see if I want to go out and buy the printed book. I guess my Kindle is sort of my way of browsing books from the comfort of my home.

Now - that iPad looks super cool. I must say the look of the ebooks has me intrigued. The idea of changeable/interactive digital covers - oh, yeah....that speaks to me as a reader and as a writer. All the other things look fun, too....so maybe I'll consider buying it down the road after the reviews are in. Again, the pricing of the books will not make any difference to me.

I do give Macmillan kudos for taking a stand - and it sounds like a smart one, one with foresight. I'm wagging my finger at Amazon for pulling a digital temper tantrum. Growing up is hard to do.

I agree with INK as well - my head hurts with all this posturing and feinting as someone mentioned. It's one-upmanship under the guise of competition.

My main concern is for the writers and the consumers. The whole industry revolves around the STORY/NOVEL, yet we have the people who support the distribution of the written work haggling over who gets the bigger piece.

What happened to those agencies that break down monopolies? The big players in these public spectacles of marketing gone bad seem to be getting carried away with their own self-importance.

I'm for the Author Team, the person who should benefit the most from their creative effort of writing a book (with the support of one's agent, of course).

One thing about the Kindle's proprietary format--you can get it elsewhere. My new book, The Vampire Kitty-cat Chronicles, is available in the Kindle format (.mobi) at both Amazon and at Smashwords.com. But I make more off of a Smashwords sale. Don't know how this will turn out as the release day was today.

This whole smacks of blu-ray vs. HD-DVD (or beta vs. VHS back in the day) when the studios were taking sides. I'm waiting til the dust settles. Best place to get free books is still the library as far as I'm concerned.

However, I believe Amazon's actions were long-term better for the developing digital market and I am *passionately* against a supplier telling a retailer how much they can discount. There's an economic term for that, folks, and it's still illegal in a lot of countries. If Macmillan wanted to sell in whatever venue at whatever price, they were free to do so-- but they actually wanted to force another party to comply with their prices. And this pressure involved goods which, by definition as creative content, have no real competition-- effectively giving Macmillan a monopoly position.

I am also absolutely floored by the hoo-rah St. Jobs rhetoric coming from the adoring crowds here. Has everyone forgotten that Jobs and Apple did *exactly the same thing* to the music industry by insisting on a stable price point for so long? Eventually they did allow dynamic pricing, but only after they had set a standard from which the consumer wasn't going to accept a lot of deviation.

(my disclaimer-- I someday hope to be a published writer. I spent most of my day job career in a combination of retail and new media publishing, so I see things from the balance sheet side of the page.)

I'm a bit of an idiot on e-reader matters, but didn't Amazon break a legal agreement with Macmillian? Couldn't Macmillian sue Amazon for breach of contract?

I suppose that soon all of this will get settled, but in the meantime, it sure doesn't make me want to run out and buy a reader gizmo, especially from Amazon. I'm sure that Macmillian merely wanted to discuss its proposition. I don't see that as a reason for Amazon to go postal. Its behavior surely doesn't make for a very good public image. I'll bet its marketing department is going bonkers right about now. :) n

I follow about a third of that, but I still think e-books will fail to make the same impact as CDs and DVDs. For one, the mentioned "book in hand" factor, and two, the lack of a dramatic improvement over the reading experience.

For travelers stuck on planes, trains, buses, airports...I get it. Very convenient, but not so much so that the price can't still come down for both books and readers.

In the end, words are words. If somehow they became "better" words through technology, then fine. I like my MP3's over my vinyl records for the most part. But until then, I'm in no hurry to budge.

. . . a publisher should have the right to set their own prices, no matter what the format. The customer can always choose not to buy them.Amazon, on the other hand, behaved badly IN PUBLIC WITH EVERYONE WATCHING. . . . I am a lot less likely to buy my books through them from now on. And I buy a lot of books.

I'm on Team Consumer of Books, even though I'm a writer. Only because I think you can't arbitrarily set a price that is higher than consumers want to spend, or feel they get value for, and expect it to last.

I like the idea of E-book prices being scalable according to how long the hardcover has been released -- the E-book gets cheaper after the hardcopy has been out for a while -- so in that this returns some control of pricing back to the publishers = good thing.

Hey, publishers, here's another idea -- why not offer the E-book at a substantial discount to readers who pop for the new hardcover release?

Nathan thanks for writing this post...this is a HUGE deal. My GUESS is that Amazon is trying to play hardball with the publisher, but the game is over.

My husband wanted to get me a Kindle for Christmas (showing his support of my novel writing aspirations and voracious appetite for reading); I said no. I'm big on books because I am all about the front and back covers and want color.

Then, comes the iPad announcement. He comes home and starts talking about this that very day. Granted, he is an early adopter of high-tech gadgets, but we are both iPhone users. (Seriously between my iPhone and the Dyson vacuum cleaner as the two best inventions in the last decade...) The fact that I can pick up the iPad and use it like I do my iPhone and keep my book collection right there in COLOR and turn the page just like I do on my iPhone, I'm sold.

Kindle is a "killed app" because it is strictly an e-reader and limited and has all kinds of rules. I checked it out and that reinforced my feeling that I didn't want one.

iPad is the game-changer. Apple will get all their iPhone users to buy at least one for the household. I think the estimate is 5 to 8 million units in year one. Amazon has maybe sold something like 3 million plus/minus units. They are evasive. And, if you think that Amazon is selling e-books for $9.99 for the consumer---no way! They're trying to corner a big share of the market, but they just lost. Think Sony BETA vs. VHS. Think Blu-ray versus HD DVDs....

I think Amazon knew exactly what it was doing. It had time to think up strategies. It's flexing it's muscles without alienating the consumer for too long. It doesn't want to drive consumers away, but it is sending a very clear message to McMillian. For example, since Sunday, MacMillian lost money.

Did people really expect Amazon to just roll over and play nice?

No matter how much better the IPad may be than the Kindle, people have consumer loyalty to Amazon. They are not used to thinking of Apple as a place to go for books. I think Apple is still in a weaker position here.

But what do I know? :) I'm just talking because it's fun. High drama.

I also think that whatever happens to day will change by tomorrow. Should be a fascinating ride.

And don't count out the writer in all this. This writer, at least, is watching. :)

Great post. Thank you for breaking it down. It seems to me that the 9.99 won't be a loss leader forever - once Amazon had made the consumer believe that e-books should be 9.99, then publishers will be forced to accept, perhaps, a 70/split from there (6.99 per unit). Don't you think that downward pressure on pricing will eventually be passed on writers? Won't it hurt hardcover sales too? I'm happy Macmillan took a stand and that Apple chose a different model. More power to them. I hope the other five follow...

I believe in consumer choice, but when the price points (between new hard cover and e-book) are a world apart, the consumer is trained to believe that books should be less than $10. It will hurt everyone in the chain accept Amazon (because they can unload $259 devices). Rather than have one gigantic super-ultra-mega-store dictate price, why not let the publishers decide price? Competition between houses would be more effective than Amazon's dictate.

As far as the comparison with the music industry. Songs are generally 99 cents, albums 9.99. That's 10-12 songs. If Amazon charged 99 cents per chapter than we'd be talking about a $30-$40 ebook, which isn't right either. The music discussion doesn't translate. Now, Amazon does sell some short stories fo 3.99. I wonder how we see fine with 3.99 for 6,000 words, but 9.99 for 100,000 words. It's out of whack, and I'm afraid the value of the art is being held hostage.

I have written my last two blogs on this issue. I think Amazon comes off looking like a bully but I think Macmillan is going to find they are wrong about what people are willing to pay for an eBook. Wrote about it here (http://tinyurl.com/yhctsh9 & http://tinyurl.com/yl3l5cz)

I agree with everything this guy says: http://www.ereads.com/richard_curtis/

Consequently, I think it's a good thing for authors. I think ultimately it will be good for everyone.

As e-books become more popular authors should be paid a royalty that is more in line with that burgeoning market. That wouldn't happen without a different pricing model. As an author, I care about that a great deal.

Most of us do not and will not ever make a living from our work. Why should that be compounded by accepting insultingly low royalties on this new market, which may very well become the primary book market?

I consider this weekend to be the first step in turning e-book royalties more our way.

A new book is released for $24.95, but Border's sells the book for $20.95 and then I have a 40% off coupon for being a Borders reward member so I get the book for 12.57 which is almost 1/2 off the cover price. Now, I have no clue what the publisher gets from Borders. But, if a brand new hardback can sell for $12.57, then aren't the books overpriced to begin with?

Yes, I know, that's a whole 'nother firestorm! Personally, I'm going to buy books, no matter the cost, because I like to read. Do I love the $9.99 option through Amazon for my Kindle reads? Heck, yeah. Am I going to grouse a bit by a price increase for one publisher? Yeah, probably! As a potentially published author one day in the future do I want the most bang for my $$$?? Yes.

In the end, rather than working together, Amazon, Apple, and the Publishers seem to work against each other, except in the fact that they contribute equally to the consumer getting screwed. : )

I just want to address something that I don't see addressed in other comments. Amazon is the major distributor of self-published works. While the occasional story is okay and was a pity it was passed over by agents, many are not. If publishing wars are going to further stifle an already tough market to break into, I see more people self-publishing, even if they can only sell a book for four bucks.

I'm sure these types of negotiations go on all the time, but customers don't hear about them. Amazon is appearing to be nothing more than a spoiled brat. If you don't come to terms, you don't do business with them -- in this case, you don't renew your contract. I would have been fine with Amazon holding the line if they weren't willing to budge on the terms. But to yank paper books, sample chapters on Kindle, and titles from wishlists without any warning shows a complete lack of respect for its customers.

I don't know what the "right price" is for ebooks, but they, and other digital content, have value. As our society moves more towards “everything digital”,we need to get used to the idea of paying for content. Many of us have little problem shelling out $10-$15 for a movie and walking out with nothing but a ticket stub. Why is this so hard?

It is easy to understand what Amazon wants to do, just read this article from Newsweek (probably mention in this blog earlier, but relevant to THIS issue as well). http://www.newsweek.com/id/227751

Jeff Bezos wants to eliminate books altogether, period. How better to do that then to bargain sell ebooks? Make it so cheap one feels foolish spending the extra money. The article claims that Kindle sales are 48% of the physical book sales. Anyone care to ask how much they are saving on shipping those ebooks???

I do think that the ipad is going to bring some of today’s youth back to reading, which is good. I fear Bezos may be confused about how he wants the Kindle to stay “reading specific”. So many of my students carry their entire lives on their phones, why drag around a Kindle? Many of my friends are already reading books on their ipods. Plus, I have rarely spent $300 on something I have never seen, or tried out. Barnes & Noble has it right with the Nook, putting them on display in their brick and mortar stores. I spent 40 minutes with one the other day and found it rather interesting, but it will be hard to keep me away from an ipad, and print books thanks…

Excuse me. I should have specified "yank paper books from the website..." They don't actually come to your home and grab your books. Not that I see it much here, but people on those Amazon forums jump all over you for an oversight like that...

As a former teacher, my first thought on iPad was that Jobs was going after the textbook market - especially at the college level. An iPad is more than a reader, it's an entertainment center and that would make it more appealing to the demographic. There's a lot of money in that market and if the iPad can breach Amazon's fiction market too - so much the better. But I think, jmo, that Apple wants the kids via textbooks first b/c it will condition them.

I am going to take a wait-and-see attitude. I am the owner of a Kindle and have gotten used to the $9.99 price for books. But I never liked the fact that I could not share the ebook I purchased with my children who do not own Kindles (and who live in different states). So this squabble has solved the problem for me. If I believe my children will like the title I am going to buy paperbacks and pass them on. I will buy ebooks of those books I want to read for my own pleasure UNLESS the price of the ebook is the same or more than the paperback, then I will buy the paperback (from Amazon).

I'm leaning toward Macmillan on this one, though I have my reservations since they recently lowered their royalties to authors on eBooks. That could be part of the pricing strategy, though, if they're willing to take less money overall (based on a percentage of the book price rather than a flat rate per unit). They're also toying with "Special Edition" eBooks with author interviews, etc. Macmillan is at least THINKING about the future of eBooks, which is encouraging.

I don't like Amazon trying to dominate the market but I also don't like publishers jacking up the prices to match hardcovers. Ebooks don't require money to make them, house them in warehouses, or ship them so I don't see why they need to compete with hardcovers. I think if the difference in prices were explained, people would still buy hardcovers if they liked the ebook enough.

As an aspiring writer, I see where the publishing industry is coming from but as a consumer I'm torn. I set a $20 limit to buy books and hardcovers are $24.95. Guess who's going to get my money?

I use my FREE Kindle (app) on my iPhone and have bought about a book a month on it. Works great!

I still like roaming through bookstores to find something new to buy and read. If you only go to Target, you only see a few choices, and it takes too long to surf online. Loves me some bookstores. Our local indie just closed though, so I have to make a drive in order to do this. :(

Ken: http://blog.nathanbransford.com/2010/02/kindle-missile-crisis.htmlKen: Comspiracy theories abound....Todd: train fares went up in chicagoTodd: probably has to do with the new iPad releaseKen:rofl Ken: That's the best one I've heard today, and I've heard them all.Todd: 70-30 and 80-20 and almost no overhead. that matters.Todd: books will find thier own price level eventually, now that we arent paying for buying armies of staff or prices controlled by a monopoly.Todd: rest of this is jsut well, entertainingTodd: authors never had a 70-30 before. let them keep duking it out. beat hell out of each other, i'm liking the resultsKen: So am I, because now I can truly offer great deals to authors for eBook rights. That wasn't possible when Amazon was only paying 35%.Todd: its WWF everynight in the book worldKen: And it will be for the forseeable future.Todd: i hope nobody ever winsTodd: thats about the only time the author and reader win, is when nobody else doesKen: yupTodd: we write, they read, everyone else is a middle man profting off both of us. reality check people. lets root for nobody ever wins this fight.

Part of the "book culture" in my family going back 100+ years has been to leave books to your kids/and or grandchildren. Ebooks, of course, will change that dramatically going forward.

My plan is to buy "cheap" entertainment once-only "reads" as ebooks. For meaningful books that might want a home within the new branches of the family tree? I'll stick to paper.

What am I willing to pay for "cheap" once-only "reads" ebooks? No more than what I'd pay for a paperback -- certainly not over $10. Should that cheapo ebook fool me and be marvelous, I'd go buy the paper version to add to my inheritable library.

The comparison between digital music and digital ebooks is so screwed up. I'll listen to an album several times a year over the years. I'll read an entertaining murder mystery ONCE.

Me too Ink; this makes my head hurt. Maybe you can get your book store back into business again with all the controversy over e-formats. ;)

I think I'm on the "Lets just get along" team. Also the, I buy a paper book, thanks, and not have to worry about following a bunch of rules for buying a novel or worrying about it disappearing from my e-shelf.

I'm on Team Amazon and Team Author. As an indie author who has published both Kindle and print editions, MacMillan stands to make A LOT more money from E-books and probably at the expense of it's authors.

I'll give you an example.

A Publisher X releases a hardcover book for $25.00. Retailers usually get a 55 percent wholesale discount, and then they subtract the cost of printing the book (let's say $5.00 per book). We are down to about $6.25 profit The author's royalty is usually set in stone, maybe $1.50 per book. So Publisher X is making about $4.75 per hardcover book sold.(I have not subtracted for marketing and promotion so that number would probably be a bit lower).

Now Publisher X releases an E-book. To publish an ebook all you need is ONE file for the infinite number sold. I used the same interior as my print book, no extra work. The cost to produce is about as close to zero extra as you can get.

So Publisher X charges $14.99 for e-book. Amazon takes its 30%, leaving 10.49. If the author has not negotiated higher royalty rates for the e-book edition, the author gets $1.50 per book. Leaving Publisher X with about $9.00 profit on the e-book. They don't have to spend any "extra" marketing the e-book over a print edition so there is no added cost there.

They'd be getting over like fat rats on the authors if the authors don't negotiate a higher royalty on the ebook edition.

Further, if the e-books sell fewer copies because of the higher price point, the fat rat Publisher is still pretty fat. But if the number of copies sold is reduced, then it will only hurt the author's royalty in the end.

That's why I'm on Team Author-- and I think Amazon's model is more author friendly. Especially in this economic climate when people are very price-sensitive.

I would like to know why an electronic version should cost half as much as a paper hardcover version. Would someone please speak to the issue of actual costs saved (paper/shipping/storage) and make an argument as to why any ebook should be more than $9.99?

I don't have time to find the post, but per HarperStudio publisher Bob Miller, only about $3-$4 are saved with e-books vs. print books. That's because a lot of the costs that go into a book (author advances, editorial, marketing, overhead) exist whether it's a print book or an e-book. Printing and shipping paper books is a very small piece of the pie.

For the record, I'm more willing to stand behind Macmillan on this one, but I still think they're all behaving like a bunch of two year olds. Mind you, that's any business I suppose. One look at my mom's office and you'd think you were looking at a third grade classroom.

I've seen a number of comments state, in effect, "It doesn't cost money to make an e-book."

But it DOES. E-book formats are not the same as print book formats. Someone has to put the book into the right format (especially where proprietary software is concerned). That person should get paid.

Someone has to translate cover art and interior art from a print format to a digital format that will work with various readers (or remove them if the reader can't handle pictures). That person should get paid.

And no matter what the book's final format, not only the author makes the book. There is an editor, a copy editor, a proofreader, and a typesetter, not to mention an artist or two (cover and interior design). Only THEN do we get to the actual difference of a physical paper book that must be shipped, warehoused, and shelved.

Let's not forget (where applicable) advertising/marketing.

Don't be fooled by the invisibility of the process that translates an author's manuscript into a book in your hand/your e-reader. There is a lot of work in a book and a lot of people involved who all would like to be paid for what they do. Skip all of them, and you get the average self-published/vanity press book.

I've actually turned a print edition into a Kindle edition and NO, sorry ma'am, there isn't a lot of labor involved in changing print to ebook formats and the same cover used for my print edition is used for my Kindle edition. And to look at my book on Kindle or on the Amazon website, you cannot tell the difference between one or the other. So, as someone who has actually gone through the process...ummm...I have to disagree.

As for the agents, the author's agent gets paid from the author's earnings. They eat the author's pie, not the publisher's pie. So, at the end of the day, if author's get screwed, so do the agents.

As for marketing, publishers are marketing the print edition, they don't need to do extra for the e-book edition. For the MOST part, revenue from e-books is like bonus money UNLESS authors earn a higher revenue for ebooks, in which case it may not make a difference. I suspect that is probably NOT the case.

@JL did you read all her stuff? The indie imprint you did did not pay for editors marketing, etc. I have also put a book on kindle and because I didn't have the $$$$ right photo program I couldn't add a cover. And how much time did you put into making it right for the format????

It takes time and money for the right programs to work with Amazon. I'm going to do my own indie imprint here soon and my own artwork. Not a problem if I want to sell low. It's all my time and effort. But here in the US, we have MINIMUM wages, and we have experts working on the books. Shouldn't they all get paid? The most intensive costs of books are the people who make them happen.

Where do you think Amazon puts their money? Probably have more tech people working to keep all the kindle apps working right.

As for the 40% off coupons etc, it costs the bookstores (I am published and I know what they pay, not mention shipping) at least that much for the book itself. The coupon is meant to get you into the store and impuls ebuy all the other things they have available. Again the prices are to reflect the cost of getting it to you and the technology and the people power it takes to do everything - like TAXES grrr. They have to pay someone to do the taxes and to figure the right amount to send into the cities and states etc. That's true for all product companies.

There is a much bigger picture here. As for Amazon, they were stupid to put up a big fight. They are always putting stuff on sale. They put my kindle on sale without asking me. I'm sure they could do the same for the books that are released.

Retail 14.99 sale 9.99 limited time, or whatever. There are ways to work around it without pulling peoples chapters, etc. They wanted the publicity and hoped the consumer would go nooooo keep it all 9.99.

@KL - How is revenue from an ebook "bonus" money for a publisher? If I buy an electronic copy of a book, that's one copy of a book I WON'T be buying in hardcover. So all the marketing, merchandising, etc. going into the print version is, in reality, also going into the electronic version. You can't separate the two - especially when you have Kindle owners going into bookstores to peruse hard copies then downloading them onto their devices right in the store.

I read an article over the weekend that said books were one of the few things people *are not* willing to give up in the recession - books trumped movies & dining out. I thought that was hopeful regardless of e-books vs. paper copies. People are never going to stop wanting to read stories . . . how those stories are purchased and read, well, we'll see . . .

I don't care who charges what as long as I can charge $4.99 on the Kindle and $4.99 on the iPad for my self published book and put more money in my pocket from one book than the bloodsucking publisher offered me for my next two books.

The Kindle and the iPad are both poised to put the power back into the hands of authors -- we can take our product directly to the consumer and make more money than deadhead publishers who think that "More of the Same" is what the public wants.

I think Amazon acted like an 8-year-old bully. (I would have been slightly more understanding if they'd kept the "buy" buttons for the print books, and if they hadn't messed with people's wish lists--and they would have explained what was going on to the public. I know one author who was on the phone with Amazon on Friday for over an hour, trying to figure out why her just-released St. Martin's book had disappeared.)

But I think Macmillan is making pricing decisions based on fear.

I understand that ebooks require cover art, editing, promotion, etc. However, if you're producing a print book, those costs are already covered. The cost to reformat the book into an electronic version doesn't seem to justify the $10-plus price that Macmillan wants to charge. (I'd love to know if I'm not seeing this correctly.)

I want a book, every single time. No files. And for as long as I can afford to do so, I'll buy them locally and from an independent. When I can't afford to do that any more, I know where there's a great library.

Thanks Nathan for all this information presented in a way I can understand.

What team am I on? Whatever makes the most sense for authors. As consumer, I will buy the books I want at any price point. I don't drive around or surf the net for deals. Discount e-books won't make me buy more, I'm just not that into them and only occasionally use my Kindle app.

But I think if anyone believes that you actually own the e-books you get from Amazon, you're nuts. The fact that they went into people's devices again and erased material is very concerning to me. Has Apple ever done anything like that with iTunes?

As far as kerfuffles go, this is one big ol' mamma jamma. One of my critique partners writes for St. Martin's Press. She has a book coming out. Great, right? Except that Amazon took the buy option off for St. Martin's. Yikes'ola.

So. Her next book is due to drop any day, she's had plenty o' fans do the "pre-order" option and now No one knows what's going on with the pre-order's or if they'll be able to buy from Amazon as they'd planned.

I'm with you, Nathan. Can't we all just get along?

This stinks. This is her second book in a proposed series. The first had the misfortune of dropping during the height of the financial crisis, as everyone held onto their breath and their checkbooks very tightly, and now this. Seriously, I have no idea how an author is supposed to plan a career around all these landmines.

I'm in the corner of any model that doesn't amount to a monopoly and frankly I've seen 4 things now that Amazon has done that make me very nervous. First they tried to force publishers who printed on POD to use their POD Booksurge, then they delisted LGBT books, including mine, from their site. This was followed by the time they went into their customers Kindles and removed books they had downloaded. Now they have a hissy fit befitting a 5 year old against a large publisher.

And every time they did this, it was done under cover and it always seemed to take Amazon a long time to respond with any kind of explanation and as far as I'm concerned those explanations were lame. In fact Amazon did nothing in each case until a slew of angry authors and readers demanded an answer.

If a $14.99 ebook can't be sustained then that should be up to the publisher to decide. Not a faceless, irrational juggernaut that seems to think it can do whatever it wants without consequence.

If and when I buy an ereader I can guarantee you it won't be a Kindle.

In theory Amazon's model is also unsustainable, though, right? They're taking a loss at the moment to encourage people to buy Kindles, but eventually they will *have* to raise prices themselves, correct? Interesting conundrum.

In any case, I see things like this and think, "Why on earth is anyone one company allowed to have this much power?" We have anti-trust laws for a reason, and it just strikes me that this is essentially Amazon trying to monopolize the market. Granted, it seems that in the past few years an awful lot of companies have been allowed to become much, much larger and more powerful than is really good for anyone. When you consider the number of smaller, independent bookstores that are going out of business, you basically have three or four major players in the game to begin with. That's just my own, probably biased, take on it.

What frustrates me about the entire situation is that rather than come out with a single format which can be used on any of these players, it seems like everyone is doing there own thing. I wouldn't buy a kindle (maybe a nook), but I'm sure as heck not buying anything until there is a single, set way to do it and those books can be used on whatever device I choose. The thought of even potentially having to re-buy books just because you change devices is enough to turn me away for now.

First, I think it's so cool that you and Kristin Nelson both refer to this incident as a "kerfluffle" on today's blogs. As I always say, "great minds steal from other great minds." Or, maybe you both just like words like "kerfluffle." I'll make a mental note of that for any query letters I happen to send your way.

Second, although $9.99 ebooks are a major selling point for the Kindle, we are after all talking about a segment of the reading market who are willing to pay upwards of $250 for a device on which to read books. Price may not be such a big consideration here,considering that printed books can be read without the aid of an expensive device. The value of a thing is what a buyer is willing to pay. Speaking strictly as a consumer, I simply do not care what costs were incurred in the production of the things I buy. If I want something, and can afford it, I don't engage the vendor in an argument over what it cost him to make it or what it would cost him to make some other product that I do not choose to buy. An ebook is an ebook. A printed book is a different product. You can't buy one and put it onto your Kindle the same way that you put your cd's onto your iPod. Comparing an ebook to a printed book isn't something that is going to happen all that much among purchasers of ebooks. Price competition for ebooks (like for like) isn't going to come from the print editions; It's going to come from other providers of ebooks. The market for the books will determine in the end whether this was a good move or not.

I don't understand why people compare the iPad and Kindle. The Kindle is a true eReader, while the iPad is a glorified iPod Touch. It does have backlighting, I couldn't stand reading an entire book on that thing. Not to mention it's overpriced for the functions (no flash, no multitasking, the battery life will probably be terrible like all Apple products).

I love my iPod and my iPhone, even my MacBook Pro, but I also have a Dell notebook and a PC. The apple fanboys will buy anything at any price, sadly.

As for the eBook war, wasn't it expected? As Mr. Bransford has said, this is not over, not by a long shot, and I wouldn't be surprised if Google eventually came out with their own device (they always wait and lurk around, then come out with a terminator product. Don't underestimate Google).

Amazon and Apple will fight it off, and this is great news for us consumers. You also have to admire CEO standing up for the market, and I think Amazon's reaction to remove buy buttons from all productions was extremely childish and unprofessional. Shame on them!

My first instinct is to side with Amazon. They sell books. Macmillan should not be able to tell them what price they have to sell their books at. That's not how bookstores work, though perhaps there are precedents for this sort of thing. A book may have a suggested retail price, but the seller typically decides what the consumer will pay to buy it from them.

I also side with Amazon in that they don't want to see the cost of ebooks go over $9.99. I'd like to see ebooks take off and generate a whole new wave of interest in reading, but I'm concerned that ebook prices over $10 will be bad for the ebook industry. Bad Apple.

I also personally LIKE Amazon because they've been hooking me up with cheap books for years with an incredible unlimited 2-day shipping plan. I also personally DISLIKE Amazon for many of their recent actions, such as the infamous amazonfail.

I'm also more concerned about Apple monopolizing Everything That Is Cool than I am about Amazon being a monopoly, though I want Apple to give Amazon some good competition.

Amazon has lost the PR war here, though, and their nuclear option looks petulant and dictatorial. I'm shocked they went nucular, as they say in Crawford.

I am HOPING that the consumer will be the winner here. Competition between Amazon, B&N, and Apple should make eReaders better and cheaper over time. Maybe they'll drop some or all DRM as well. I'm guessing that the economic reality of competition will produce a better ebook market for everyone, because Amazon and Apple are both titans and neither should be able to fully dominate the other.

'Nathan, I don't think $3 to $4 is a VERY small piece of the pie. It's as much as the author and agent are likely to get from a hardcover, more than they get from a trade paperback, and about half the price of a mass market paperback.

The big discount to a few publishers for bestsellers was meant to lure them into not noticing that Amazon was going for a vertical monopoly that could seriously damage their businesses.

And ff Amazon were to achieve the domination they dream of, they would dictate price to everyone, Bigs, included, just as they dictate them to us small publishers now. Small publishers were getting that rotten 30%--take it or get out--while the bigs were getting their sweeteners.

The long term potential is what made it essential for the Bigs to stand up on this issue. They can afford to do it now because right now Kindle sales are a TINY piece of their action. Amazon wouldn't be so secretive about their actual sales numbers if they weren't pathetically tiny.

So Macmillan can easily sacrifice trivial earnings now in return for retaining much more control for the future, so in 5 years when e-books are selling ten times or more what they sell now they don't have to sell them at a price Amazon dictates--one unlikely to rise with inflation, either.

Because A) I'm one of those people who is in a lifelong love affair with books - actual paper books, that have different smells and feels.

And B) no matter what my opinion is, what's gonna happen is gonna happen and there's not a blessed thing I can do about it. Except keep buying new hardcover books - this is the only vote I get, methinks. And it's not much.

1. Is it worth noting that Apple is not entirely letting publishers set their own e-book prices? They are capping prices at $14.99 (for now), which seems to me to be raising the waterline but still establishing the waterline.

2. Amazon may be good at making money, but this episode is just another example of incredibly poor decision-making over there. Consider the automatic removal of a title they shouldn't have sold from Kindles; the way they tried to take over the POD business (turning off Buy Now buttons if authors did not agree to let Amazon's POD company print them); and now this. What's the company motto? "We're big, get over it"?

Liz Czukas said, "This whole smacks of blu-ray vs. HD-DVD (or beta vs. VHS back in the day) when the studios were taking sides. I'm waiting til the dust settles. Best place to get free books is still the library as far as I'm concerned."

Exactly right, Liz.

If they want me, they can have me but I want better flowers and candy first and I'm not going steady with anyone who isn't stable.

I have a Kindle. I've had a Kindle for almost 2 years, and I love it. I'm not wedded to the $9.99 price point, but that price has resulted in my buying more books since I had the Kindle. Why? I don't buy hardbacks, because they take up too much room, so I'd wait for the paperback. By then, for some books, I would have lost interest or forgotten about them or the reviews were mediocre or I got them from the library or borrowed them from a friend, etc. At $9.99 and the instant gratification of Whispernet, I'm much more likely to just buy the book.

And BTW, none of my wish lists were tampered with, nor were any of my samples removed from my Kindle during this Macmillan blackout. I'm not sure where that idea is coming from.

I don't know what's best for the market, but I don't like the way Amazon has been handling this at all. The fact that they're willing to not carry books bothers me a lot, as does the fact that they can delete books from people's Kindles at any time. Those two things together have turned me anti-Kindle (though not anti-eReader).

That aside, and I guess since we're writers we're only looking at the e-book side of the iPad. But it's also going to Microsoft a run for it's money too. Too bad it can only run h one app at a time, is non-expandable, and has a maximum of 64 gigs.

Wait, I think Apple did that on purpose!. Otherwise they'd be competing with themselves. Why buy a Mac Air when you can get this really cool device?

As long as the iPad offers a word processing application, I'll buy one when it's time to replace my ultra-portable. My dreams of a Mac Air have been replaced.

Currently the E-Book market is really geared toward middle-class readers. However, historically, cell phone companies have placed technologies into the hands of users by offering a discount on the the technology in exchange for a contract. By partnering with AT&T the E-Book market is being opened up to people who wouldn't spend the money for an e-reader but who might buy a book since they have the app anyway. This device is going to make E-Books available to millions. Imagine what would have happened to sales of Twilight if kids had an e-reader?

Most kids don't have e-readers. If a family has an e-reader, its one. This spring that's going to change. Everybody has a cell-phone. It's so smart, Amazon is probably kicking themselves for not seeing it.

It's very possible that by 2011 e-books sales surpass paperback sales. Within a few years books will probably go "viral." There will be "surprise" books that sell millions of copies with little to no advertising. Book companies are going to have a lot harder time knowing which books to promote. As if that wasn't hard enough already.

There has been a lot of "The end of publishing OMG!"

Bah.

After the first E-book goes viral, publishing companies be scrambling to find the next hot book.It means publishing more books. And with the low over head for e-books, there's little reason not to publish more. It'll probably reach the point that only best sellers are published on paper.

Right now the e-book market is pretty easy to get into for an author who wants to self-publish. Once corporations start making money off e-books, limits will be placed on who can publish their book. Like what happened to radio. (Otherwise big name authors will be letting go of their agents and publishers left and right. Why give would authors give up up 75% + of profits?)

these people are psycho! for the vast majority of consumers, BOOKS ARE OPTIONAL! if you make them too expensive, most people will not buy. period. somebody once had a rule of thumb that a hardback book should cost as much as a good restaurant meal. and that's with producing an actual object that takes materials, etc. naturally ebooks should be cheaper, since they are basically air and fairy dust. if these idiots scheme the price much past 9.99$ people will do other things, in droves. and so will i; there are many fun and free alternatives in this crappy economy.

It didn't seem to me as though the iPad even really cares about being an eReader. That seemed to be the least of its benefits. I preordered and cancelled my cable. I'm going to watch tv via my iTunes and the network websites. On my iPad. Works great for me. Simplifies lots in my life.

This is a huge opportunity for the publishing industry to innovate and reinvent the way we interact with books and stories. So, instead of innovating and reinventing they moan about the pricing. Geesh!

Interesting...This recently from AMZN<a href="http://www.pcmag.com/article2/0,2817,2351087,00.asp:>Two Kindle users</A> – one of them a high school student – have filed a class-action lawsuit against Amazon after the company remotely deleted copies of George Orwell's "1984" from their e-readers. In late July, Amazon CEO Jeff Bezos apologized to Kindle users after the company deleted Orwell's books from its Web site and users' Kindles without notice. Amazon did not have the rights to distribute Orwell's books, but it did not immediately reveal this fact to Kindle users who complained about the deletions.

"Our 'solution' to the problem was stupid, thoughtless, and painfully out of line with our principles," Bezos wrote to customers. "It is wholly self-inflicted, and we deserve the criticism we've received. We will use the scar tissue from this painful mistake to help make better decisions going forward, ones that match our mission."

The whole weekend reminded me of the Cuban Missile Crisis, too. Sadly, unlike you, Nathan, I can remember the real one (I was in elementary school, but I do remember it). Also sadly, there seemed to be more shoe-thumping Russians than JFKs.

I say it's a bonus because even if they sold that book to you in hardcover rather than e-book, they'd only be making $4.75 according my example.

With an e-book they're making nearly double. That's a bonus in my book. I'll sell you an ebook at twice the profit of a hardcover ANY day. Sign me up for THAT program. lol

Has anyone ever visited Kindleboards? Most of the Kindle users there tend to be VERY price sensitive. They are very happy with that 9.99 and I don't see many of them happily accepting a $3-$5 increase on e-books when they've been getting them cheaper for so long. I've seen them yell boycott for far less. But that has just been my own personal experience. But I think I'll set up a post and ask. Maybe I'm off.

I can't speak for other authors on Kindle, but I know it took me about 30 minutes, maybe an hour MAX to format my book. However, on the technologically-challenged scale--I'm not. So, perhaps that helped improve my efficiency a bit.

Nathan, excellent breakdown. I personally don't read e-books, so as a consumer, this doesn't affect me. I'm not a published author, either (yet). But these are the two groups that have the least control over what happens and the most to lose.I like Amazon. I order from the site all the time. But to yank all electronic and print Macmillan books? As my son would say: "Harsh"Whatever happens, I hope the authors don't suffer too much in this mess.

I don't see why they don't just do like movies have done with digital copies; you buy the book, you get a digital copy for an EReader.I don't have one, nor do I plan on getting one, but this really does make my head hurt.

What I hear from your post is this: Publishers are saying they want to let Apple's iBook store have a fair chance to sell their books. They believe the iBook store may eventually win, so they want to make sure Amazon is playing fair.

I personally have little interest in a Kindle or an iPad. I'd rather have a book I can hold in my hands. It's just like the whole MP3 vs. CD thing: I like MP3s and MP3 players, but you just can't beat holding that CD in your hand and knowing its yours. Both the more compact versions have their places. They still can't compare to the original.

But as for the Macmillian/Amazon squabble: I have to side with Macmillian on this one. They should fight for their right to control the prices of their own ebooks, no matter what Amazon has to say about controlling the ebook environment.

When you have to pay hundreds of dollars for a "reader," then, in my opinion, the books should be very cheap, not priced like paperbacks.Classics should probably be even less, 1/4 of the cost of reprinted books. Then I will have the incentive for a stand alone reader. Even at 9.99, I wish they would throw in the reader for free with ten books. I'd buy the ten books and try it out and maybe get to love the reader.Apple offers MORE than just a reader, a nicer larger size, and it's sooo shiny. Something to think differently about. Again.

Amazon, reportedly, refused to offer for sale books published by someone they disagree with. This is censorship. This is WRONG. Amazon has (in)famously censored its offerings in the past. Censorship is WRONG. I am an adult, I will decide what I would like to read (or listen to, or watch) and what I would not like to. You can have my FREEDOM OF CHOICE when you pry it from my cold, dead hands. Amazon can take a long walk off a short pier as far as I'm concerned.

Another thing I saw with the Amazon $9.99 was a scenario which I saw play out in the cruise industry. One cruise line bought another and they wanted new lower prices with attractions providers for the line they acquired. Their argument was that their customers on one line paid that price, why shouldn't the customers on the other line? The problem for the attractions was that they had been taking a loss on the first line because they knew people on that line wouldn't buy expensive tours. I think I'd be afraid as a publisher that Amazon would eventually try to lower what they paid me, based on the 9.99 model, and also that customers would come to think that was what a book is worth.

What I find really interesting is that the content is being sold as the loss leader for the device. It's the old razor & blades thing turned inside out. (paper books become the disposables in this analogy)

Frankly, I am less interested in how this might affect the publishing industry (companies are not inherently entitled to survive, let alone thrive) than I am in how this might affect the creation and consumption of art in general. The ultimate logical conclusion is that all creators will be instantly in touch with all consumers. When manufacture and distribution become essentially free, the real value will be in providing search, filter, rating, and digest... essentially, clearing out the clutter for the consumer.

Dedicated E-Readers are a solution to a problem that does not exist. Unlike recorded music and movies, books do not need a machine to be read. All E-books should (and eventually will) be readable on all screens, including PCs and laptops and tablets and mobile phones.If standalone E-readers survive they will probably cost no more than a couple of hardcover books, just as DVD players now cost no more than a couple of DVDs.

I bought a Kindle as soon as they became available internationally, and love it. And while I wasn't particularly thrilled with Amazon's pulling all Macmillan titles over the weekend, I could understand why they did. The publisher was telling Amazon at what price it had to sell its books.

As the article points out, Macmillan would actually get less from Apple than it does from Amazon for the same book.

As for the $9.99 price point, there are already books that sell for more than that in the Kindle store; I know, because I've bought a couple. I'd never boycott Macmillan, either, as some of our favourite authors are under their umbrella. And I've bought a couple of books by those authors in the last 24 hours, for my Kindle.

The whole thing is part of business — hey, it's called free enterprise. It will all get sorted out in the long run, and with luck, it won't include price fixing of retailer's book prices online.

Heaven knows, many bookstores have held to publisher-dictated prices — printed on the covers of the books themselves — for decades. Perhaps it's time for a little more flexibility, and not as many books will end up remaindered on $1 shelves.

I can see that these devices are useful for travellers.What about an e-book library system where you just rent the book for a period of time? I wouldn't like to own a lot of e-books on one fallible/stealable/breakable device.And Imagine a world without real books - I Wonder If You Can?

I know it will take years before it is even viable for me to own an e-reader - due to where I live. But I'll throw in my 2 cents.

Many people are saying this is like any other retail debate, the big boys will hash it out, while the consumer goes about their business. But I can't help but side with Amazon on this. Their behaviour wasn't the best choice they made - but I see what they are saying.

If I purchase a product from you for $4 and retail it at 8$, good for me. Regardless of what produce all retail works the same.

The e-book pricing war should be fought between retailers (amazon and apple) not producers (Macmillan).

Retailers will eventually settle down with a price that is high enough to make profit (undercutting prices can't be done indefinately) and not so high that it scares consumers.

Macmillan is trying to ensure the sale of their paper books, by throwing their weight around in the retail of e-books. It really shouldn't get a say. If Macmillan has agree to sell their product to Amazon at set price per unit. What business is it of theirs what Amzon then retails it for? They are getting the agreed price for their product.

If they want to release the e-book after the hardcopy - then let them fight about that. If that increases the piracy rates, well that is not Amazon (or any retailers) fault. That is a risk Macmillan take in their decision on when to release the e-book.

I think we've all forgotten how important it is to purchase hardback copies from independent booksellers. iPad, Kindle... None of these devises can compete with the experience of a real book.

At first I had nothing against the Kindle. I was just happy to hear people were reading--That people continue to read and love literature is so important, and it seems, so much harder in a world where everything is digital and flickering by.

But as a novelist, I think it's important that the publishers be able to control the pricing. More and more I see Amazon as a malevolent factor in all of this.

I'm all for saving money, but I believe that spending a little more on books in independent bookstores does more good for everyone involved.

1. you can download your Kindle purchases to your computer. Amazon can't reach in to your computer and swipe it back.

2. you can download books to your Kindle from other sites. You can also use freeware and break DRM, you can convert files.

3. which leads us to piracy. I'm on Team Let's Just See What The Consumers Decide, Shall We? Because ultimately the prices of e-books will be set by sales.

My fear is MacMillian is wrong. You can think Amazon is throwing a tantrum, you can believe they're bullies, but what if MM is WRONG and consumers will not pay more? Consumers on there are already zapping authors with one-star reviews for delaying releases. What if they decide they won't pay more?

And frankly, why would they when they're are now tons of piracy sites where they can get books for free?

MacMillian is playing a dangerous game. Bicker with Amazon all you want-but WHAT IF THEY'RE MISJUDGING THE CONSUMER?

I think this whole situation serves to nicely destroy the (fragile) myth of your "friendly neighborhood [online] superstore"; the bottom line has been truly laid bare. This would ideally be translated into a shifting of loyalties on the part of the consumer, wherever those loyalties lie. I will thus henceforth refrain from using the Kindle app on my iPhone. As with everything else, it is up to the consumer to make conscious, educated choices and speak their minds with their dollars.

Congratulations on presenting this issue with as much objectivity as possible. Honestly, this is the only article I have read on the issue that has provided me with both sides of the coin.

I understand the idea of Macmillan leveling the playing field, wherein they are able to maintain control over their own pricing strategies over their own products. Even if it does mean a lower take per title. It still allows them to have control over placing a value over their own product.

At the end of the day, the end result really does remain in the consumer's hands. It's actually their reception of the Kindle or the IPad that will dictate and reveal who the true winner of the the e-book v i-book debacle.

I understand that printing, mailing, and return allowances are only a portion of the cost of printing a book. It seems like the "right" cost for an e-book should be print price minus printing, shipping, and return costs.

But here's another point that no one has mentioned. The shift to e-books is going to be gradual. Let's say that right now a book sells 20,000 print and 1,000 ebooks. If they deduct the printing costs from those 1,000 ebooks, then the costs to print are spread between profits on 20,000 print books. But what about in six years? What if they're then selling only 2,000 print books and 19,000 ebooks? The costs to print CANNOT be covered by only 2,000 print books, because it does not cost 10x as much to print 20,000 as it costs to print 2,000.

Until publishers switch to POD, they'll have the same massive costs to set up a printer and set all the bookplates, etc. for every book, regardless of how many print books are sold. Therefore they HAVE to take money from the sale of ebooks to cover print books. Therefore they cannot price ebooks as low as we think they should...unless the book is published in ebook form exclusively.

That instant-printing-book-machine (can't remember it's name) and technology like it will become more of a player as the ratio of print-to-ebook sales shifts, I think. For then it will allow publishers to put the costs for book printing solely on the sales of print books.

No matter what, I'm not worried about them finding something sustainable. People aren't going to quit writing books and buying them. Not completely. The ultimate decision on all of this will be made by the consumer and the authors. The publishers are the middlemen who have to make a profit based on what authors are willing to accept and readers are willing to pay.

I don't see that it matters who is setting prices. If no one's willing to pay $14.99/ebook, then it hardly matters who set that price. The company will realize it's not sustainable.

There are simply too many factors at work to say how it "should" be, among them:- What royalty rates authors will accept- How many readers are willing/able to cough up the money for various e-readers, since the cost of e-books doesn't much matter to those of us who can't afford the readers- How quickly cheap knock-off e-readers become available. I only switched to downloading mp3s when I could afford a mp3 player.- How many formats become standard- Where the DRM battles end...which might affect cheaper ereaders, if they're anything like the cheap mp3 players that couldn't play some music files.- Whether readers and authors successfully discover ways to connect without needing publishers- And possibly whatever Adobe comes out with, since plenty of us are currently satisfied with pdf versions of ebooks! Personally...if Adobe came out with an inexpensive e-reader that allowed me to re-format the text so that it was more readable than they are on my phone without so much scrolling, I'd go for that!

When ebooks are perceived to be overpriced consumers resort to piracy. The same thing happened with music -- until Apple came up with the solution: The 99 cent iTune, sold in a convenient and easy-to-use online store, vertically integrated with hardware and software.

Amazon has the iTunes model -- vertically integrated hardware AND apps that can be used on other devices (PCs, iPhone, iPod Touch, and now the iPad), a great user interface, and a pricing structure (trying to place all products at price points at or below 9.99) to discourage piracy and maximize legitimate book sales.

The question is whether the publishers want to sell a high volume -- at a consumer friendly price -- OR set a high price, and give away most copies for free (piracy ensues), resulting in lower revenues for them AND Amazon.

The music industry tried that game (setting digital prices to match price of physical media in a last ditch attempt to protect their CD sales in physical stores). It didn't work. What makes the book industry think it will be different?

The marketing analysts at Amazon aren't dummies. They are looking to maximize profits for themselves and their vendors. They are playing to win. The alternative is that everyone in the chain loses.

Recent history (music industry experience) would suggest that Amazon is taking the better approach to protecting and growing the publishing industry in the digital age.

Jobs fought the battle with the recording industry; it appears he isn't going to expend the energy to do it with publishers . . . the ereader is not the primary function of the iPad device (as music was with the iPod). He doesn't have a skin in this game . . . he'll stand back and let Amazon fight this battle. He has better things to do with his creative efforts.

I wouldn't want an agent right now sides with amazon.com. I don't mean to be offensive, but the Authors Guild has made it clear that amazon.com winning this one is BAD for authors. Agents are supposed to work for authors, no?Why linger in the middle ground, Nathan? The future is now. This isn't hard t figure out. You with us or agin us?

"Recent history (music industry experience) would suggest that Amazon is taking the better approach to protecting and growing the publishing industry in the digital age."

Recent history suggests that amazon.com is taking the better approach to protecting and growing amazon.com. Nothing else.

If you haven't noticed, they're a "publisher" now. 4 books, then 40 books, then 400 books they can price anyway they want to and meanwhile tell other publishers how they must price their products?That's good for everybody?

It isn't good for the industry when pricing forces consumers to resort to piracy.

Like Jobs and Apple, Amazon has done extensive market research (they have a huge database of sales to crunch the numbers on) to prove that pricing over 9.99 results in significant buyer fall off.

What are those buyers doing instead? Can you say torrent?

Yes, Amazon will do what is good for Amazon, and that is to sell books. But that is also good for publishers (I'm pretty sure they want to sell books too). The difference is that the publishers believe they are protecting their hardcover business by setting high prices for ebooks (more than the consumer wants to pay). The truth is that these consumers won't pay the high price for hardcover either . . . they have already switched to the digital paradigm, ergo they will find the book in digital format, and if that's free so be it. Or they will substitute a different, cheaper book (after all, there are millions of books to read, and plenty of books priced in the 0-$5 range on Kindle store).

In the end the publisher who insists on high ebook prices doesn't gain a $15 sale at the local B&N store; instead they lose a 9.99 digital sale.

Under the overpriced digital book scheme the consumer wins (finds a free copy online, goes to the library, or buys something else), but writer, agent, publisher AND Amazon lose.

Moira Young, thanks so much for posting that link. It is exactly what I have been arguing ever since this whole dispute began.

It's really disheartening, as a writer, to see so many people who profess to be "readers" so ready to dismiss the content as if it were some interchangeable commodity that has no value beyond its packaging. I don't get it.

Of course there are differences in content between books, but the consumer doesn't always see it that way. The mainstream publishers are partly to blame for the "interchangeable commodity" mentality, especially at the midlist, genre fiction level. "Hey, if you like Author X you'll also like Author Y." Implied: The books are formulaic anyway!

To a great degree this is true.Take romance, or thrillers, or paranormal, or detective stories for example. You may follow a favorite author, but there are plenty of others writing similar stuff. Even within an author's works you'll find just six or seven basic plot lines, so even an author "commoditizes" their own work. How many times have you read a book and said, "I've read this before?". With some authors it happens to me all the time!

Take a look at how indie authors are taking advantage of this fact, and cleaning up on Kindle store in genre fiction categories. They set their prices lower, and they are selling very well. Konrath comes to mind, and a number of others in the fantasy, techno-thriller, and even romance categories. They are writing good stories and pricing them competitively. Yes, to some degree these are seen as commodity genres. Content and style are important, but for most readers there are many authors who will "fit the bill".

My own pricing experiments have shown elasticity to be quite high . . . I sell 20 times as many books at 99 cents as I sold at 3.99. I'm making a LOT more money at the lower price. Yes, Amazon wants to sell more books at a lower price . . . it is far more profitable for them and the publishers. This is a no brainer. My own limited sales data are proving this point.

Amazon's position is driven by millions of data points and hard analysis. Macmillan's position is driven by a desire to protect their hardcover business. While that's a profitable position for Mcmillan right now, it probably won't be in five years, as digital book sales grow. Amazon's position is more forward looking. Macmillan is still operating in the past, and it will eventually bite them in the arse.

I understand McMillan's dilemma. They are trying to buy some time to weather the transition, but Amazon is on the right side of this from a business perspective.

An interesting and clear analysis of the situation. I have an unusual perspective - as a Macmillan's author. My book, THE MYSTERY OF LEWIS CARROLL, published by a division of Macmillan was launched today in the US. Can't say I feel too warmly towards Amazon for making it impossible for people to buy it.

No, correction : they CAN buy it --from third party sellers who have bought the review copies given out free by the publishers. So I won't earn anything on them.

Not sure what my conclusion is yet, except that I'm glad to have a different publisher in the UK, and one who is not in dispute with Amazon.

I had been one of those readers who was very suspicious of the Kindles (etc). Then i had read more on the subject, including your blog a few months ago that talked about myths about eReaders. My significant other recently offered to buy one for a gift for me, and i was very close to saying yes... until now. Now i'm very suspicious again.

Elie @February 2, 2010 1:39 AM wrote, "What about an e-book library system where you just rent the book for a period of time?"

SFPL is already doing something like this, although the system isn't set up for a Kindle app or an iPad app yet. ...

The formats used are Mobi, Adobe, and Overdrive. You select a title. The e-book downloads to your device. You have x number of days to read the book and at the end of that time period *poof* (sort of like the self-destructing tapes in MISSION IMPOSSIBLE). If you want more time with the title, you have to ask for it again, download it again, &c. No renewals. :-(

Still, it's a start and the wave of the future. No rental involved. Free with your library card.

Aren't e-books at the library like piracy on the internet? Off subject, I know.

As for the $3 - $4 difference, you are suggesting that is the only cost to paper and ink. Can this be true?

Can consumers be made to understand the "middle men" between the author and themselves have enriched the book and put a spotlight on an otherwise overlooked commodity? What is that value?

For me it is price point. No book is worth $25 unless I can reference it. As for e-books, $9 for a file that is worth nothing after reading, hardly seems a bargain at $15. Do people throw books away? GASP! I know computers are trash, I mean, they crash.

In the end the author will suffer sales while the consumer decides. Amazon and McMillan have shown authors they will lose sales and consumers they are in charge. Amazon thought they would block sales; watch the consumers stop buying. McMillan thought they would set prices; consumers have the purchasing power. End of story.

(1) Amazon wins in the short run because they will now be making instead of losing money on every book from MacMillan (and any other publishers who follow that publisher's lead)

(2) Inter-publisher rivalry and simple market forces will drive down ebook prices to perhaps as low as $9.99 again. (Lower prices is what happens to artificially elevated prices in the absence of monopoly power and collusion.)

(3) Publishers will make less money in the long run and have less to offer authors, with the result that more authors will bolt their publishers for Amazon in the way Steven Covey, Martin Amis, Ian McEwan and now Paul Coelho have, giving Amazon the win in the next round too...

The difference between Amazon and ITunes is simple. A real album (at least the ones I priced) generally costs about the same for the electronic version as it does for the disk. If you buy all the songs as singles, it costs more, not less, for the entire album.

And some albums still cost more than others.

I've read several comparisons of Amazons to ITunes on other blogs and in press releases. The comparison is only valid if Amazon upholds the hardcover price and/or starts selling books by the chapter. Otherwise, they are undercutting prices that the industry (lead by them in a few cases) has already established the general public is willing to pay.

This is more about profit margin versus volume with the publishers arguing for the profit margin and Amazon pushing for volume (i.e. remark: Incomplete sentence books), which makes sense. Even if it hurts the publishing industry, Amazon still wins because it sells a diverse array of products. Seriously, when is the last time you only ordered a single item?

As for the "we provide DRM and keep your product safe" argument... I wonder how anyone can be naive enough to believe this. DRM is a euphemism for "hack me".

It's irrelevant that MacMillan won. No one is going to buy an ebook over $10. Go look at the top 100 bestsellers on Amazon. Not one is over $10 and around 50% are $1 or less. MacMillan may have won against Amazon. It won't win against the consumer.

I am with Amazon all the way. Apple had a big hand in destroying the music industry. Now Steve Jobs who has said no one reads anymore, is going after the publishing industry. The publishers were getting paid more under Amazons system. Steve Jobs and the publishers are in collussion. He stated in an interview when asked how he would be selling books at higher prices he stated they would be the same. He and his Ipad are no winners for a true reader that reads hundreds of books a year I do not want a back lit screen. I was waiting to see the Ipad as a replacement for my laptop. I do not own an Apple product now and NOR WILL I EVER BUY AN APPLE PROUCT. I will not even buy an Apple product, or contribute to the purchase of one for someone else.

Whilst i admire MacMillan for standing up for what they presumably believe in but i'm with Amazon the cheaper e-book front. I love apple but i wish they would make the books cheaper although i'm British and i don't yet know the pricing in £.

Although, I much prefer holding a book in my hand. Plus i distrust anything with DRM, i don't like how i can't move my purchase to other devices or do what i've been free to do since before everything went digital.

I like that it protects the work but i hate the limitation so for me its books, cds and DVDs maybe in blu-rays in the future.

I can't understand how people might think the MacMillian model is a good thing. Just apply this to other things you buy daily. Imagine that there's ONLY list price. No black fridays, no discounts, no sales. EVER. All stores with the exact same price. That's the MacMillian model.

I, for one, don't think it is in the consumers best interests.

I'll remind everyone that a book is a monopoly. That's what copyrigth is, a monopoly. There's no competition, because books aren't interchangeable.

I'm a newbee to all of this. A new writer, new to this website and a new e-book user, receiving the Barnes and Noble Nook for Christmas.

I love to read! My house is full of books that I have no room for. The main reason I love my ebook is because I can carry around an entire library without putting my back out and if I happen to finish a book and I'm sitting in the doctor's office waiting, I can download a new one.

I believe ebooks are here to stay and the publishers need to resolve this issue because it's not going away.

I'm sorry, but as a writer or a reader, I'm not on either side. I'm against Amazon's attempt to play monopoly, and I'm against the idea of charging or paying more for ebooks. Why should anyone less for a paperback book that they can keep for a hundred years if they take care of it, as they do for an e-copy which probably won't be supported by the software vendors even ten years from now?

Very interesting and educative post about price war, but I think your math from the beginning of the article has at least one big error. Paper copy really costs more than e-book beacuse the complete cost of print, storage and transport is all on publisher, not on bookstore. So publisher of e-book can lower his share and still make even bigger profit.

In our country (Slovenia) we have also a law of fixed price (price of book must be printed on book), so the seller really doesn't have much of maneuver place. Law says the publisher dictates the price, but in reallity the seller says if he wants the book on his shelve.

In my opinion after the global price war settles down winners should be books - printed and electronic editions.

As an Author to be, I wonder how all of this is going to hit my fellow aspiring Authors, and already established Authors. Will they be forced to price higher, or if I understand it, have no choice at all in how much their book costs? Will that have an effect on their sales and ability to survive in the ebook business?

And what about the Author in relation to getting their work published? Will the controls put in place by Apple and agreed to by Amazon cause the process of getting published quickly ebook style a thing of the past?

On the other hand, competing businesses are supposed to be a good thing fro the consumer, but perhaps this case is different.

Okay, thanks for the info in your blog. I have been comparing e-readers over the last few days and finally came to the most important criteria somewhat by mistake; the fact that e-books are essentially the very same price as their paperback counterparts! Your blog certainly brought some detail to my level of understanding, however, I virtually never buy hardcovers, and had to adapt your model to the world of paperbacks. As a consumer, and perhaps it's on principle alone, I won't pay the same price, much less more for a digital file. I have purchased several new release paperbacks over the last 12 months for an average retail of 9.99; and I think that is too high but I guess the market will bear it because I keep buying books. However, I won't even pay close to that for an e-book, even if they start handing out the very best e-readers for free! Only when or if e-book prices descend somewhere between 5-7 dollars per file will I embrace digital conversion.

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